Because Facebook's advertising marketplace relies on an auction sales model, greater competition and improved ad products has increased the social network's overall advertising yield. In fact, cost per thousand impressions (CPM) is reportedly up 60 percent, while cost per click (CPC) revenue is up 30 percent for the first half of 2011. As competition increases, these numbers are expected to as well, into the next quarter and potentially even into the next year.

In the past six months, Facebook has made significant improvements and innovation to its advertising products, including launching new products like the Sponsored Stories ad unit, zip code targeting, topical targeting, broad targeting and improved ad metrics. Businesses have been increasingly investing in Facebook pages and Facebook apps instead of spending their budgets on Yahoo, AOL, and MSN. On top of all this, with its quickly growing user base (800 million active users and counting), the company's social graph is exploding across all demographics, which fuels improved ad targeting, performance, and revenue as well.

Skeptics will note that Dave Williams, the author of the report, is the co-founder and CEO of Blinq Media, a company that specializes in Social Engagement Advertising. In other words, he is biased in that he wants to see Facebook Ads grow. On the other hand, Williams also has an insider look at what's happening in the advertising business. It's certainly not the first time we've heard that Facebook is turning the industry upside down.